Flashcards in Chapter 4 - Brokerage Relationships and Ethics Deck (63):
What are the two types of law in regards to agency relationships?
What is common law?
Derives authority from customs rooted in the common law of England prior to the American Revolution and from the judgments and decrees of the courts (case law) that have since affirmed and enforced those customs
What is statutory law?
Includes the statutes and rules enacted by legislatures and other governing bodies
In addition to statutory law, what other laws directly affect and regulate the brokerage relationships among real estate licensees, buyers and sellers, and the public?
Real estate license law and the Florida Real Estate Commission rules
What is a principal?
A person who delegates authority to another
What is an agent?
A person entrusted with another's business
What type of agency relationship is created with the principal?
A fiduciary relationship
What is a fiduciary?
A person who acts in a position of trust or confidence for another
The fiduciary owes complete allegiance to the __________________.
A fiduciary relationship _________ with the common public relationship that exists in normal trading transactions where people with adverse interests are said to be dealing at arm's length with one another.
What are the three "degrees of authority" delegated to an agent in general business dealings?
What is a universal agent?
A person authorized by the principal to perform all acts that the principal can personally perform and that may be lawfully delegated to another (ex. An attorney who manages the trust agreement of a mentally retarded adult; duties would include overseeing the principal's financial affairs, medical care, employment opportunities, and living arrangements)
What is a general agent?
A person authorized by the principal to perform only acts related to a business or to employment of a particular nature (ex. A property manager who is authorized to show and rent apartments, collect rents, supervise maintenance and upkeep of the property, handle tenant relations, and perform bookkeeping duties)
What is a special agent?
A person authorized by the principal to handle only a specific business transaction or to perform only a specific act (ex. a CPA hired to prepare your tax return and, if necessary, answer any inquiries from the IRS concerning the tax return)
What is a dual agent?
A broker who represents as a fiduciary both the prospective buyer and the prospective seller in a real estate transaction
It is _____________ in Florida for a real estate licensee to operate as a dual agent.
When a broker represents a buyer or a seller as a ____________, the broker is in a relationship of trust and confidence between the broker as ___________ and the seller as _____________ or the buyer as ________.
Fiduciary; agent; principal; principal
What is a residential sale?
The sale of improved (has a house) residential property of four or fewer units, the sale of unimproved (land with no house) residential property intended for use as four or fewer units, or the sale of agricultural property of ten or fewer acres
What is a transaction broker?
A broker who provides limited representation to a buyer, a seller, or both in a real estate transaction, but who does not represent either party in a fiduciary capacity or as a single agent
What are the seven duties of the transaction broker in this limited form of representation?
1. Deal honestly and fairly
2. Account for all funds
3. Use skill, care, and diligence in the transaction
4. Disclose all known facts that materially affect the value of residential real property and are not readily observable to the buyer
5. Present all offers and counteroffers in a timely manner
6. Exercise limited confidentiality, unless waived in writing by a party
7. Perform any additional duties that are mutually agreed to with a party
In a transaction broker relationship, the seller (or the buyer) is considered to be a ____________ of the real estate broker and not a __________.
What is a single agent?
A broker who represents, as a fiduciary, either the buyer or the seller, but not both, in the same transaction
In a single agent relationship, the seller (or the buyer) is the _____________ and the real estate broker is the ___________.
What does the term "principal" mean in a single agent relationship?
The party with whom a real estate licensee has entered into a single agent relationship
What are the nine duties a real estate licensee owes to a buyer or seller who engage the real estate brokerage as a single agent?
1. Deal honestly and fairly
5. Full disclosure
6. Account for all funds
7. Skill, care, and diligence in the transaction
8. Present all offers and counteroffers in a timely manner
9. Disclose all known facts that materially affect the value of residential real property and are not readily observable to the buyer
What does the broker do if a seller or buyer chooses to not be represented by a real estate broker?
Facilitate the sale (or the purchase) of real property without entering into either a single agent relationship or transaction broker relationship
A real estate licensee working in a no brokerage relationship capacity with a buyer or a seller has the following three duties:
1. Deal honestly and fairly
2. Disclose all known facts that materially affect the value of residential real property that are not readily observable to the buyer
3. Account for all funds entrusted to the licensee
Is a licensee allowed to change from one brokerage relationship to another?
Yes, as long as the buyer or the seller, or both, give consent before the change occurs
To gain the principal's written consent to a change in relationship, the buyer or seller (or both) must either sign or initial the ____________________ notice set forth in Chapter 475.
Consent to transition to transaction broker
Is a real estate broker allowed to represent both the buyer and the seller in a transaction in a fiduciary capacity?
No, if both parties entered into a single agent relationship with the brokerage firm, an illegal dual agent relationship would be created
In a real estate transaction other than a residential sale and where the buyer and seller each have assets of $1 million or more:
The broker, at the request of the buyer and seller may designate two sales associates to act as single agents for the buyer and seller in the same transaction - designated sales associates
Are designated sales associates allowed in a residential transaction?
What is misrepresentation?
Misstatement of fact or the omission or concealment of a factual matter; can lead to fraud
What are the elements of a cause of action for fraud?
1. The licensee made a misstatement or failed to disclose a material fact
2. The licensee either knew or should have known that the statement was not accurate or that the undisclosed information should have been disclosed
3. The party to whom the statement was made relied on the misstatement
4. The party to whom the statement was made was damaged as a result
What disclose notice must be given before a single agent can change to a transaction broker?
Consent to transition to transaction broker
Steven is so cautious that he refuses to sign all legal documents. Your office policy is to include a note in his file indicating the time, date, place, and circumstance under which you made the disclosure that Steven refused to sign. You may NOT work with Steven under which circumstance?
Change from a single agent to a transaction broker to shower Steven's home to an in-house buyer-principal
The brokerage relationship disclosure requirements in Chapter 475 apply to the:
Sale of a condominium unit
What statement best describes the duty of loyalty in a single agent relationship?
The broker must act in the best interest of the principal
A real estate broker who works in a limited capacity for both the buyer and the seller in the same transaction is:
A transaction broker
A licensee of ABC Realty must give the no brokerage relationship notice to:
A for-sale-by-owner (FSBO) seller before showing the FSBO home to a buyer customer of ABC realty
Broker Murl is an agent of the seller. The seller has disclosed the Murl that the ceramic tile is loose in the dining room because the cement did not adhere to the tile. The loose tile is not readily visible because it is covered with an area rug to protect the seller's toddler. Murl has satisfied his legal obligation if he tells the buyer:
That ceramic tiles in the dining room are loose
A brokerage relationship is terminated under which circumstance?
The broker agent renounces the brokerage relationship
A seller lists her home for $116,900. The seller tells the sales associate that she needs to get at least $112,000 for the home. Following Sunday's open house, the sales associate receives two offers on the home. The first offer for $116,900 is contingent on the seller's financing a portion of the down payment. The second offer is for $112,000, with the buyer to secure her own financing. The sales associate should:
Present both offers, explaining the details of each to the seller
In the common public relationship that exists in a typical real estate transaction, buyers and sellers are said to be dealing:
At arm's length with each other; The Reason: Typically it is a transaction in which the parties are dealing from equal bargaining positions, each looking out for his or her best interest
If a principal gives his or her broker instructions that will result in loss or harm to the principal, the broker:
Should inform the principal of possible harm inherent in the instructions, and then either do as instructed or withdraw from the relationship
A broker's obligations to consumers with whom the brokerage firm has no brokerage relationship include the duty of:
Accounting for all funds
Designated sales associates are best described as:
Single agents for the buyer and the seller in nonresidential transactions where the buyer and the seller meet certain asset thresholds
An individual who is empowered by a principal to handle a particular transaction for the principal is a:
For a buyer to prove a charge of fraud against a real estate licensee who has made a nonfactual statement about a property, the buyer must prove all of the following:
Misstatement was made by the licensee
Misstatement made by the licensee was material to the transaction
Buyer was damaged by misstatement
A transaction broker involved in a residential sale discovered before the closing that a large recycling facility will be built approximately three-quarters of a mile from the home site. The transaction broker should:
Disclose the information to both the buyer and the seller
A real estate sales associate must disclose to a prospective buyer that:
The family room addition does not comply with local building codes
A listing sales associate who shows a property to a ready, willing, and able buyer has certain obligations to the buyer. What is one thing the sale associate does not have to disclose?
The sales associate does not have to disclose to the buyer that he is a Transaction broker
A broker represents a seller as a single agent on the sale of his property. A buyer comes to the house and wants the broker to sell her the house and represent her in the transaction. The broker agrees without any further notice to the seller. This is a case of:
Undisclosed dual agency and is illegal in Florida
All are residential property as defined by Florida law except:
A five unit apartment house
What is considered residential property in Florida?
Improved residential property of four units or fewer; unimproved residential property intended for use of four units or fewer; agriculture property of 10 acres or fewer
Disclosure rules do not apply to:
The rental or leasing of real property, unless an option tp purchase all or a portion of the property improved with four or fewer residential units is given
Dispositions of any interest in business enterprises or business opportunities, except for property with four or fewer residential units
The person who is empowered to act on behalf of another is called:
Law governing agency laws are called:
Law of Agency
Which agent usually has the power of attorney?
A universal agent
A sales associate is working with a buyer in a fiduciary capacity. With regard to disclosure, which form must be signed by the buyer to clarify the role of the buyer and licensee?
The Single Agent notice
A subagency relationship would most likely occur when:
A salesperson is working for a broker who is a single agent of the seller or buyer
How long must a broker keep disclosure paperwork?